Tourre, on trial in federal court in New York, is accused of misleading investors in the deal. The U.S. Securities and Exchange Commission has said the former Goldman Sachs bond trader told investors that Paulson & Co was investing in the deal when in fact it was betting against it.

In court on Thursday, the SEC submitted a January 2007 email sent by Tourre in which he described Paulson & Co as “transaction sponsor” of the deal, a synthetic collateralized debt obligation known as Abacus 2007-AC1.

Tourre’s boss at the time, Jonathan Egol, said he normally would reserve that description for an investor in a CDO rather than use it to describe an entity, like Paulson & Co, with a short position.

“I wouldn’t customarily have used the term ‘transaction sponsor’ in that way,” said Egol, a managing director at Goldman Sachs Group Inc.

The testimony came on the fourth day of the trial in the SEC’s case against Tourre, 34, the sole remaining defendant in a lawsuit that Goldman Sachs settled for $550 million in 2010.

The meaning of the email could be a key issue in the case. It was sent by Tourre to an executive at ACA Capital Holdings Inc, another participant in the deal, which the SEC has said was also misled by Tourre about Paulson & Co’s role.

According to the SEC’s case, Goldman told investors in Abacus that ACA Capital Holdings selected the securities in the deal, while in fact the investments were mainly picked by Paulson & Co.

Tourre’s lawyers, who will start calling their witnesses next week, have sought to show it was common knowledge in financial markets that Paulson & Co was betting against subprime mortgages.

Egol’s statements, which seemed to bolster the SEC’s case, came the day after another witness said he told the same ACA executive that Paulson planned to short Abacus.

The witness, former Paulson & Co Managing Director Paolo Pellegrini, said he believed he told Laura Schwartz, the primary ACA employee on the deal, “what we were trying to accomplish by shorting the market.

After Pellegrini’s testimony, which appeared to undercut the SEC’s case, the SEC reshuffled its witnesses to bump up the testimony of former Goldman saleswoman Gail Kreitman, who is expected to testify as early as Friday.

The SEC has indicated it plans to introduce a recording of Kreitman telling an ACA employee that Goldman was “placing a hundred percent of the equity” with Paulson.

In a letter sent to the judge late Wednesday, the SEC said Kreitman could testify that while she does not recall specifically who gave her that false information, “the most likely source” was Tourre.

U.S. District Judge Katherine Forrest, though, said Thursday she did not want “the witness to guess, unless she can remember Mr. Tourre told her that.”

“I don’t see any basis for her to connect the dots the jury should connect,” Forrest said.

During cross-examination Thursday, Egol said Goldman Sachs actually lost money on Abacus.

Goldman earned $15 million in fees on the Abacus deal, the SEC says. But Egol said by the end of 2007 the firm had lost $80 million to $90 million due to exposure it had to Abacus.

The case is SEC v. Tourre, U.S. District Court, Southern District of New York, No. 10-03229.